PROCEDURES AND DOCUMENTATION

FOR AVAILING EXPORT INCENTIVES

Exports are given priority in India and enjoy lot of incentives. However, the major problem lies
in the process of realizing them. Unfortunately, exporters have to approach multiple
organizations for seeking sanction. Each organization prescribes its own exclusive method of
documentation as well as procedure form the stage of submission of claim till sanction. The
documentation and procedures are diverse with each incentive provided. This is not the end of
their problems. Incentives are available at post-shipment stage but they are connected with the
documents generated at the time of shipment. If exporter does not pay adequate care and
attention at the time and stage of export shipment in providing complete and adequate
information in the documents in a proper way, their claims for export incentives are adversely
affected. It is essential to the exporters to plan carefully in respect of incentives, even at the time
of shipment, though their benefits are available only after completion of the shipment.

In the absence of adequate planning, it will upset their fund flow and equally the total realization
may not be remunerative for effecting exports. Exporters have to draw a suitable plan of action
for claiming incentives in a timely manner to avoid delays and cuts in realization. Exporters have
to understand the different procedural formalities, connected with multiple and diverse agencies.
This would ensure proper compliance for availing of full benefit of incentives. In this area,
Government has to rationalize the incentives by opening a single window approach for sanction
of multiple claims.

TYPES OF INCENTIVES

Government of India has been endeavoring to develop exports through various financial and
non-financial assistance and fiscal incentives to the exporters. They are divided in two
categories. They are:

1. Incentive Linked to Export performance

(a) Duty Drawback(DBK)

(b) Excise Duty Refund/Exemption

(c) Duty Free Replenishment Certificate

(d) Duty Entitlement Pass Book Scheme.

2. Duty Exemption Scheme

Advance License

3. Fiscal Incentives

(a) Sales Tax Exemption

(b) Income Tax Exemption

4. Claim for Rail Freight Rebate

5. Claim for Air Freight Assistance

DOCUMENTATION AND PROCEDURE FOR CLAIMING INCENTIVES

The procedure for claiming these incentives is different for different incentives.

Duty Drawback (DBK)

The duty drawback refers to the refund in respect of Central Excise and Customs Duties paid in
respect of raw materials and other inputs used in the manufacture of the product, prior to export.

Whom to Apply: The customs house in whose jurisdiction the exporters factory or warehouse is
situated.

When to Apply: An exporters is entitled to claim the duty drawback as soon as the export of
goods is completed. Delivery of goods at the port of destination is not essential. Export for the
purpose of claiming duty drawback is evidenced by Let Export Order. Claim application is to
be submitted with in a period of three months from the date of Let Export Order, issued by the
Customs Officer. The exporter can seek extension of period for submission of claim. The
Assistant Commissioner can grant extension for a period of three months, if he is satisfied that
the exporter is prevented from submitting the application.

When Samples are Drawn: In case, any sample has been drawn from the shipment of goods to
determine the contents of the basic materials for fixation of drawback, the sample report is be
given to the exporter within a period of one month from the date of taking the sample. This
report is to be submitted along with other relevant documents for submitting the claim. Delay in
giving the report will be added to the period allowed for submission i.e. three months period. For
example, if the sample report is given after one month and twenty-five days, the exporter can
submit the claim within three months and twenty-five days, in addition to the discretionary
extension period of three months.

Drawback Rates: The Government of India announces the rates of duty drawback every year on
31st May, product wise in the drawback schedule. Generally, the rates are expressed as a
percentage of the FOB value of the goods exported. All such rates are called All Industry Rates.
The rates are made effective from 1st June of every year. In case, duty drawback rate is not
announced for a particular product, the manufacturer/exporter is known as Brand Rate. In case,
the rate of duty drawback is less than 80% of the duties paid, the exporter can submit an
application for suitable upward revision. This is known as Special Brand Rate. The application is
to be submitted to Directorate of Duty Drawback Ministry of Finance.

When Duty Drawback not Admissible: Duty drawback is admissible for the export of all the
notified products. However, in the following cases, it is not admissible:

(a) No excise/customs duty is paid for the manufacture of export product

(b) Amount of drawback is less than 1% of the FOB value of the goods. However, if the amount
of drawback is more than Rs.500, it can be claimed

(c) If the export proceeds are not realized within six months

(d) If the amount of foreign exchange spent on the inputs used for the export is more than the
foreign exchange value of the exports. In other words, value addition is negative

(e) Cenvat Credit is availed of

How to File Claim: The procedure for claiming duty drawback depends upon whether the
processing of shipping documents has been computerized or not. The exporter is not required to
file any separate application for claiming duty drawback, if the processing of documents has
been computerized at the jurisdiction customs station. Where processing has not been
computerized, separate application is to be submitted for claiming duty drawback. Triplicate
copy of the shipping bill becomes the application only after the Export General Manifest is filed.

Documents to be submitted: The following documents are to be submitted to the Directorate of

Duty Drawback:

(a) Triplicate copy of the Shipping Bill

(b) Copy of bank attested invoice

(c) Copy of Packing List

(d) Copy of Bill of Lading/ Airway Bill

(e) Copy of ARE-1 form, where applicable

(f) Insurance Certificate, where necessary

(g) Copy of the Test Report, where required

(h) Copy of communication regarding Special Brand Rate fixation

(i) Copy of the export contract or letter of credit as the case may be

(j) Pre-receipt for drawback claim

How Claim Amount is paid: The Customs House that has the jurisdiction over the port or airport
through which exports are affected makes the payment.

How Delay in Payment of Claim is avoided: when the claim application along with complete set
of documents is submitted, an acknowledgement in the prescribed form is issued to the exporter
within 15 days from the date of filing the claim. The duty drawback is to be paid to the exporter
within a period of two months from the date of acknowledgment. In case of delay, interest
@15% per annum is paid for the period of default. Due to compulsory interest provision,
normally, claims are settled in time.

Processing an Export Order

i. Confirmation of order

On receiving an export order, it should be examined carefully in

respect of items, specification, payment conditions, packaging,
delivery schedule, etc. and then the order should be confirmed.
Accordingly, the exporter may enter into a formal contract with the
overseas buyer.

ii. Procurement of Goods

After confirmation of the export order, immediate steps may be taken

for procurement/manufacture of the goods meant for export. It should
be remembered that the order has been obtained with much efforts
and competition so the procurement should also be strictly as per
buyers requirement.

iii. Quality Control

In todays competitive era, it is important to be strict quality conscious

about the export goods. Some products like food and agriculture,
fishery, certain chemicals, etc. are subject to compulsory pre-shipment
inspection. Foreign buyers may also lay down their own
standards/specifications and insist upon inspection by their own
nominated agencies. Maintaining high quality is necessary to sustain in
export business.

iv. Finance

Exporters are eligible to obtain pre-shipment and post-shipment

finance from Commercial Banks at concessional interest rates to
complete the export transaction. Packing Credit advance in pre-
shipment stage is granted to new exporters against lodgment of L/C or
confirmed order for 180 days to meet working capital requirements for
purchase of raw material/finished goods, labour expenses, packing,
transporting, etc. Normally Banks give 75% to 90% advances of the
value of the order keeping the balance as margin. Banks adjust the
packing credit advance from the proceeds of export bills negotiated,
purchased or discounted.

Post Shipment finance is given to exporters normally upto 90% of the

Invoice value for normal transit period and in cases of usance export
bills upto notional due date. The maximum period for post-shipment
advances is 180 days from the date of shipment. Advances granted by
Banks are adjusted by realization of the sale proceeds of the export
bills. In case export bill becomes overdue Banks will charge commercial
lending rate of interest.

v. Labeling, Packaging, Packing and Marking

The export goods should be labeled, packaged and packed strictly as

per the buyers specific instructions. Good packaging delivers and
presents the goods in top condition and in attractive way. Similarly,
good packing helps easy handling, maximum loading, reducing
shipping costs and to ensuring safety and standard of the cargo.
Marking such as address, package number, port and place of
destination, weight, handling instructions, etc. provides identification
and information of cargo packed.

vi. Insurance

Marine insurance policy covers risks of loss or damage to the goods

during the while the goods are in transit. Generally in CIF contract the
exporters arrange the insurance whereas for C&F and FOB contract the
buyers obtain insurance policy.
vii. Delivery

It is important feature of export and the exporter must adhere the

delivery schedule. Planning should be there to let nothing stand in the
way of fast and efficient delivery.

viii. Customs Procedures

It is necessary to obtain PAN based Business Identification Number

(BIN) from the Customs prior to filing of shipping bill for clearance of
export good and open a current account in the designated bank for
crediting of any drawback amount and the same has to be registered
on the system.

In case of Non-EDI, the shipping bills or bills of export are required to

be filled in the format as prescribed in the Shipping Bill and Bill of
Export (Form) regulations, 1991. An exporter need to apply different
forms of shipping bill/ bill of export for export of duty free goods,
export of dutiable goods and export under drawback etc.

Under EDI System, declarations in prescribed format are to be filed

through the Service Centers of Customs. A checklist is generated for
verification of data by the exporter/CHA. After verification, the data is
submitted to the System by the Service Center operator and the
System generates a Shipping Bill Number, which is endorsed on the
printed checklist and returned to the exporter/CHA. In most of the
cases, a Shipping Bill is processed by the system on the basis of
declarations made by the exporters without any human intervention.
Where the Appraiser Dock (export) orders for samples to be drawn and
tested, the Customs Officer may proceed to draw two samples from the
consignment and enter the particulars thereof along with details of the
testing agency in the ICES/E system.

Any correction/amendments in the check list generated after filing of

declaration can be made at the service center, if the documents have
not yet been submitted in the system and the shipping bill number has
not been generated. In situations, where corrections are required to be
made after the generation of the shipping bill number or after the
goods have been brought into the Export Dock, amendments is carried
out in the following manners.

1. The goods have not yet been allowed "let export" amendments
may be permitted by the Assistant Commissioner (Exports).
 2. Where the "Let Export" order has already been given,
amendments may be permitted only by the Additional/Joint
Commissioner, Custom House, in charge of export section.

In both the cases, after the permission for amendments has been
granted, the Assistant Commissioner / Deputy Commissioner (Export)
may approve the amendments on the system on behalf of the
Additional /Joint Commissioner. Where the print out of the Shipping Bill
has already been generated, the exporter may first surrender all copies
of the shipping bill to the Dock Appraiser for cancellation before
amendment is approved on the system.

ix. Customs House Agents

Exporters may avail services of Customs House Agents licensed by the

Commissioner of Customs. They are professionals and facilitate work
connected with clearance of cargo from Customs.

x. Documentation

FTP 2015-2020 describe the following mandatory documents for import

and export.

Bill of Lading/ Airway bill

Commercial invoice cum packing list

shipping bill/ bill of export/ bill of entry (for imports)

(Other documents like certificate of origin, inspection certificate etc

may be required as per the case.)

xi. Submission of documents to Bank

After shipment, it is obligatory to present the documents to the Bank

within 21 days for onward dispatch to the foreign Bank for arranging
payment. Documents should be drawn under
Collection/Purchase/Negotiation under L/C as the case may be, along
with the following documents

- Bill of Exchange

- Letter of Credit (if shipment is under L/C)

 - Invoice

- Packing List

- Airway Bill/Bill of Lading

- Declaration under Foreign Exchange

- Certificate of Origin/GSP

- Inspection Certificate, wherever necessary

- Any other document as required in the L/C or by the buyer or

statutorily.

xii. Realization of Export Proceeds

As per FTP 2015-2020, all export contracts and invoices shall be

denominated either in freely convertible currency of Indian rupees, but
export proceeds should be realized in freely convertible currency
except for export to Iran.

Export proceeds should be realized in 9 months.

Essentials for STARTING EXPORTS

Export in itself is a very wide concept and lot of preparations is required by
an exporter before starting an export business. To start export business, the
following steps may be followed:

1) Establishing an Organisation

To start the export business, first a sole Proprietary concern/

Partnership firm/Company has to be set up as per procedure with an
attractive name and logo.

2) Opening a Bank Account

A current account with a Bank authorized to deal in Foreign Exchange
should be opened.

3) Obtaining Permanent Account Number (PAN)

It is necessary for every exporter and importer to obtain a PAN from

the Income Tax Department. (To apply PAN Card Click Here)

4) Obtaining Importer-Exporter Code (IEC) Number

An IEC is a 10 digit number which is mandatory for undertaking export/

import. Application for obtaining IEC Number can be submitted to
Regional authority of DGFT in form ANF 2A along with the documents
listed therein.

Applicants can also apply for e-IEC on the DGFT website

(http://dgft.gov.in/). Only one IEC can be obtained against a single PAN.

5) Registration cum membership certificate (RCMC)

For availing authorization to import/ export or any other benefit or

concession under FTP 2015-20, as also to avail the services/ guidance,
exporters are required to obtain RCMC granted by the concerned
Export Promotion Councils/ FIEO/Commodity Boards/ Authorities.

6) Selection of product

All items are freely exportable except few items appearing in

prohibited/ restricted list.

After studying the trends of export of different products from India

proper selection of the product(s) to be exported may be made.

7) Selection of Markets

An overseas market should be selected after research covering market

size, competition, quality requirements, payment terms etc. Exporters
can also evaluate the markets based on the export benefits available
for few countries under the FTP. Export promotion agencies, Indian
Missions abroad, colleagues, friends, and relatives might be helpful in
gathering information.

8) Finding Buyers
Participation in trade fairs, buyer seller meets, exhibitions, B2B portals,
web browsing are an effective tool to find buyers. EPCs, Indian
Missions abroad, overseas chambers of commerce can also be helpful.
Creating multilingual Website with product catalogue, price, payment
terms and other related information would also help.

9) Sampling

Providing customized samples as per the demands of Foreign buyers

help in getting export orders. As per FTP 2015-2020, exports of
bonafide trade and technical samples of freely exportable items shall
be allowed without any limit.

10) Pricing/Costing

Product pricing is crucial in getting buyers attention and promoting

sales in view of international competition. The price should be worked
out taking into consideration all expenses from sampling to realization
of export proceeds on the basis of terms of sale i.e. Free on Board
(FOB), Cost, Insurance & Freight (CIF), Cost & Freight(C&F), etc. Goal of
establishing export costing should be to sell maximum quantity at
competitive price with maximum profit margin. Preparing an export
costing sheet for every export product is advisable.

11) Negotiation with Buyers

After determining the buyers interest in the product, future prospects

and continuity in business, demand for giving reasonable
allowance/discount in price may be considered.

12) Covering Risks through ECGC

International trade involves payment risks due to buyer/ Country

insolvency. These risks can be covered by an appropriate Policy from
Export Credit Guarantee Corporation Ltd (ECGC). Where the buyer is
placing order without making advance payment or opening letter of
Credit, it is advisable to procure credit limit on the foreign buyer from
ECGC to protect against risk of non-payment.(To know more about
ECGC Click Here)
Incentives for Importing/Exporting

Why aren't more companies importing or exporting? Is it because they're short-sighted? Is it

because they're lazy? Is it because they lack incentives? Or is it because they don't know how to
start?

In 2014, the United States exported an all-time record of $2.34 trillion worth of goods and
services. These known exports equaled the entire gross domestic product of Brazil and exceeded
all commercial output in Mexico, Italy and India.

And there's more! Exports are an increasingly important aspect of the U.S. economy by way of
creating jobs, being more productive businesses and paying employees healthier salaries.

SMEs, which are firms with fewer than 500 employees, accounted for 98 percent of the number
of U.S. exporters in 2013 and they continue to be a critical driver for economic growth.

That said, exports support our economic recovery.

Imports, on the other hand, are essential to economic well-being or tend to be highly attractive to
consumers but are not available in the domestic market. As consumers, we love variety and
options and the United States is not 100% self-sufficient. Goods or services that satisfy domestic
needs or wants can be produced more inexpensively or efficiently by other countries, and
therefore sold at lower prices. Hence, why we import.

How do you jump on board and begin importing or exporting?

Here's an example.

Import/Export Incentives
Imagine selling a shipment of scarves in Ireland for U.S. $2 apiece that cost 25 cents apiece to
manufacture in Korea -- and all you needed to do was travel to Ireland and make the sale. You'd
do it, wouldn't you?

If you received an inquiry from Africa requesting a price quote for one million Cisco-compatible
computer software disks, wouldn't you respond?

If you were looking for an exciting, challenging and rewarding position as an "import/export
manager," wouldn't you want the knowledge to land the job?

These opportunities are out there, waiting to be seized. Some realistic incentives of import/export
include:
 Increasing your sales.

Enhancing your image in the world marketplace.

Generating economies of scale in production.

Raising your profitability.

Broadening your own intellectual horizons.

Exploring previously untapped markets.

Selling excess domestic capacity.

Insulating seasonal domestic sales by finding new

foreign markets.

Outmaneuvering competitors.

Improving your return on investments.

Creating jobs.

Enriching our country.

Traveling to places you've never been before.

The cool factor (hey, Im global!).

If these incentives aren't enough, how about survival pure and simple? Business is about beating
the competition or keeping up at the very least, and these days you've got a lot more to worry
about than the competing business on the other side of town.

No matter what your product or service, you've got competitors all over the world, and more and
more of them are managing worldwide operations. The best -- maybe even the only -- way to
stay competitive with this new breed of import/export business managers is to become one
yourself.
Furthermore, consider how your business helps fuel your country's economic engine. If you and
other business owners fail to keep pace with the changing world and import/export, that engine
will run out of steam. Then where will you be?

Benefits of Importing
New markets to source from for nearly 20 years, China has been the lowest
cost and most popular market to source from and still has the largest manufacturer
base suited to export markets. However, the Chinese currency will gradually
increase soon and imports from China will also increase in price so new import
opportunities will emerge from ASEAN and other countries

New products to market when launching new products to export markets, manufacturers
in China and India tend to focus on the US and EU because of the size of those markets.
Australia, mostly due to our lack of population and buying power is further down the list of
priorities. This means new products dont always make their way to Australia on release so it can
be a season or two before commercial quantities of product make there way to Australian
shelves, or online stores. There are often good opportunities for savvy importers looking to
bring a new product to market .

To garner benefit of free trade

Appointing a oversease Sales Agent.

Introduction

Selling a product through an overseas agent is a very successful strategy. Sales agents are
available on commission basis for any sales they make. The key benefit of using an overseas
sales agent is that you get the advantage of their extensive knowledge of the target market. Sales
agent also provides support to an exporter in the matter of transportation, reservation of
accommodation, appointment with the government as and when required. It is, therefore,
essential that one should very carefully select overseas agent.

Merits of Appointing a Sales Agent

There are various types of merits associated with appointed a sales agent for export purpose are
as follow:

Sales agent avoids the recruitment, training, time and payroll costs of using own
employees to enter an overseas market.

An agent is a better option to identify and exploit opportunities in overseas export

market.

An agent already have solid relationships with potential buyers, hence it saves the time of
the exporter to build own contacts.

An agent allows an exporter to maintain more control over matters such as final price and
brand image - compared with the other intermediary option of using a distributor.

Demerits of Appointing a Sales Agent

There are also certain disadvantages associated with appointing a sales agent for export purpose
which are as follows:

After-sales service can be difficult when selling through an intermediary.

There is a risk for exporter to lose some control over marketing and brand image.

Important Points While Appointing a Sales Agent:

Appointing right sales agent not only enhance the profit of an exporter but also avoid any of risks
associated with a sales agent. So it becomes important for an exporter to take into consideration
following important points before selection an appropriate sales agent for his product.

Size of the agent's company.

Date of foundation of the agent's company.

 Company's ownership and control.

Company's capital, funds, available and liabilities.

Name, age and experience of the company's senior executives.

Number, age and experience of the company's salesman.

Oher agencies that the company holds, including those of competing products and turn-
over of each.

Length of company's association with other principal.

New agencies that the company obtained or lost during the past year.

Company's total annual sales and the trends in its sales in recent years.

Company's sales coverage, overall and by area.

Number of sales calls per month and per salesman by company staff.

Any major obstacles expected in the company's sales growth.

Agent's capability to provide sales promotion and advertising services

Agent's transport facilities and warehousing capacity.

Agent's rate of commission; payment terms required.

References on the agents from banks, trade associations and major buyers.

Some source of Information on Agents is:

Government Departments Trade Associations.

Chambers of Commerce.

Banks.

Independent Consultants.

Export Promotion Councils.

 Advertisement Abroad.

Registration of Exporters.

Once all the research and analysis is done its time to get registered with the
various government authorities for enabeling one to export goods and
services .

Registration with Reserve Bank of India (RBI)

Registration with Director General of Foreign Trade (DGFT)

Registration with Export Promotion Council

Registration with Commodity Boards

Registration with Income Tax Authorities

Registration with Reserve Bank of India (RBI)

Prior to 1997, it was necessary for every first time exporter to obtain IEC number from Reserve
Bank of India (RBI) before engaging in any kind of export operations. But now this job is being
done by DGFT.

Registration with Director General of Foreign Trade (DGFT)

For every first time exporter, it is necessary to get registered with the DGFT (Director General of
Foreign Trade), Ministry of Commerce, Government of India.

DGFT provide exporter a unique IEC Number. IEC Number is a ten digits code required for the
purpose of export as well as import. No exporter is allowed to export his good abroad without
IEC number.

However, if the goods are exported to Nepal, or to Myanmar through Indo-Myanmar boarder or
to China through Gunji, Namgaya, Shipkila or Nathula ports then it is not necessary to obtain
IEC number provided the CIF value of a single consignment does not exceed Indian amount of
Rs. 25, 000 /-.

Application for IEC number can be submitted to the nearest regional authority of DGFT.

Application form which is known as "Aayaat Niryaat Form - ANF2A" can also be submitted
online at the DGFT web-site: http://dgft.gov.in.

While submitting an application form for IEC number, an applicant is required to submit his
PAN account number. Only one IEC is issued against a single PAN number. Apart from PAN
number, an applicant is also required to submit his Current Bank Account number and Bankers
Certificate.

A amount of Rs 1000/- is required to submit with the application fee. This amount can be
submitted in the form of a Demand Draft or payment through EFT (Electronic Fund Transfer by
Nominated Bank by DGFT.

Registration with Export Promotion Council

Registered under the Indian Company Act, Export Promotion Councils or EPC is a non-profit
organisation for the promotion of various goods exported from India in international market.
EPC works in close association with the Ministry of Commerce and Industry, Government of
India and act as a platform for interaction between the exporting community and the government.

So, it becomes important for an exporter to obtain a registration cum membership certificate
(RCMC) from the EPC. An application for registration should be accompanied by a self certified
copy of the IEC number. Membership fee should be paid in the form of cheque or draft after
ascertaining the amount from the concerned EPC.

The RCMC certificate is valid from 1st April of the licensing year in which it was issued and
shall be valid for five years ending 31st March of the licensing year, unless otherwise specified.
Registration with Commodity Boards

Commodity Board is registered agency designated by the Ministry of Commerce, Government of

India for purposes of export-promotion and has offices in India and abroad. At present, there are
five statutory Commodity Boards under the Department of Commerce. These Boards are
responsible for production, development and export of tea, coffee, rubber, spices and tobacco.

Registration with Income Tax Authorities

Goods exported out of the country are eligible for exemption from both Value Added Tax and
Central Sales Tax. So, to get the benefit of tax exemption it is important for an exporter to get
registered with the Tax Authorities.

Export License.

Introduction

Canalisation

Application for an Export License

Exports Free Unless Regulated

Introduction
An export license is a document issued by the appropriate licensing agency after which an
exporter is allowed to transport his product in a foreign market. The license is only issued after a
careful review of the facts surrounding the given export transaction. Export license depends on
the nature of goods to be transported as well as the destination port. So, being an exporter it is
necessary to determine whether the product or good to be exported requires an export license or
not. While making the determination one must consider the following necessary points:

What are you exporting?

Where are you exporting?

Who will receive your item?

What will your items will be used?

Canalisation
Canalisation is an important feature of Export License under which certain goods can be
imported only by designated agencies. For an example, an item like gold, in bulk, can be
imported only by specified banks like SBI and some foreign banks or designated agencies.

Application for an Export License

To determine whether a license is needed to export a particular commercial product or service, an
exporter must first classify the item by identifying what is called ITC (HS) Classifications.
Export license are only issued for the goods mentioned in the Schedule 2 of ITC (HS)
Classifications of Export and Import items. A proper application can be submitted to the Director
General of Foreign Trade (DGFT). The Export Licensing Committee under the Chairmanship of
Export Commissioner considers such applications on merits for issue of export licenses.

Exports Free unless regulated

The Director General of Foreign Trade (DGFT) from time to time specifies through a public
notice according to which any goods, not included in the ITC (HS) Classifications of Export and
Import items may be exported without a license. Such terms and conditions may include
Minimum Export Price (MEP), registration with specified authorities, quantitative ceilings and
compliance with other laws, rules, regulations.